Budget 2012: 'Granny tax' hits five million pensioners

The Chancellor was accused of an “outrageous assault” on the over-65s after he used his Budget to announce that he would end a century-old tax break introduced by Winston Churchill.

The “age-related allowance”, which means pensioners start paying tax at a higher income level than workers, is to be phased out, Mr Osborne said.

The move will mean prudent savers retiring in future will miss out on a tax break worth, on average, £285 a year, despite the Chancellor’s claims that the move would not leave pensioners poorer “in cash terms”. The move, instantly labelled a “granny tax”, will hit up to five million older people who will pay an extra £3.3billion in income tax over the next four years, according to Treasury figures.